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Thinking about switching to intermodal? There may not be any space for you

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If a shipper frustrated by rising trucking rates, higher fuel surcharges and the inability to secure a truck is thinking of turning to intermodal, Todd Tranausky has a message: there isn’t much room at the inn.

Tranausky is the vice president for rail and intermodal at FTR Transportation Intelligence, and that was a message he delivered to FTR’s conference in Indianapolis, in a first-day address and in an interview with FreightWaves. His comments in this story are from the interview.

“We’ve got a domestic container capacity tightness caused by rail service issues,” Tranausky said. “So people who need domestic containers to move their goods are in a tough spot. There are just not the boxes to do that.”

The squeeze on containers is not a function of just too few boxes, Tranausky said. As service has stalled, it has resulted in “extended cycle times…users that were getting 3-day cycle times are now getting 7-day cycle times.” As the equipment that exists spends more time on the rails, it means that overall capacity is reduced.

“In some cases, the cycle times have doubled, and that is taking capacity out of the market,” Tranausky said. Shippers looking to shift from the truckload sector into the intermodal sector are running into that limitation, he said.

But still, some users do want to shift to intermodal. Some of them are turning to what Tranausky said were “suboptimal” solutions, such as using international containers or trailers. Trailers have the disadvantage of not being able to be double-stacked, which is a key advantage of containers that are designed to be moved in that configuration.

International containers, according to Tranausky, have always had the disadvantage that their owners didn’t want them to roam too far. “They’re owned largely by steamship lines on lease, so they don’t want them wandering inland,” Tranausky said. “They want it closer to port, so it’s quicker for them to get it back and repositioned for the next load.”

What’s being missed, Tranausky said, is the railroads’ ability to seize an opportunity “that they have talked about for the better part of a decade.” The intermodal industry has been hoping for conditions to align where truck capacity gets tight and shippers turn to the rails. But they’re running into limitations of the system.

“They need to get their service house in order so they can compete and give shippers the type of service they expect,” Tranausky said. The standard that the railroads need to meet to take business from trucks? “Truck-like,” Tranausky said. With the ELD mandate effectively shaving trucking capacity by extending transit times as much as 2-3 days, he said, the opportunity is there.

Railroads have taken positive steps, Tranausky said. Locomotives have been taken out of storage, but as to the current problems, “it’s really around operating crews. It’s more about getting crews in the door.” Railroads are trying to hire staff but are running into the same trends that were cited several times during the FTR conference and which you can hear almost anywhere: transportation is competing against strong job markets in manufacturing and construction, and as Tranausky said, they don’t require that their employees walk two miles alongside a train in a “monsoon.”

In the intermodal sector, to change that will necessitate the hiring or more crews. “It’s also probably going to take a little bit of economic softening to stem the overflow volumes,” Tranausky said.

As far as rates, Tranausky said year-on-year rate increases through June were running about 15%. By the end of the year, that comparison will probably be down to 5%, he said.


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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.